Enterprise Risk Management, commonly known as ERM, is the identification and mitigation of risks associated with a company’s strategic goals. An organization must align strategic goals and resources when implementing and maintaining a successful risk management program.

March 7, 2011

Enterprise Risk Management, commonly known as ERM, is the identification and mitigation of risks associated with a company’s strategic goals. An organization must align strategic goals and resources when implementing and maintaining a successful risk management program.

Effective Risk Strategy

Effective ERM integrates with strategic planning in the following areas:

Financial/Operational – Defines how much and what type of value the organization must create to satisfy shareholders and stakeholders.

Customer – Describes the value proposition the organization promises to deliver to its customers and why customers should buy from the organization, rather than rival competitors.

Process – Describes how the organization will efficiently and effectively deliver value promised to customers.

Too often the responsibility of risk management is placed upon a few individuals within an organization. ERM assigns risk management responsibilities to all departments within an organization, and empowers all employees to consider the likelihood and impact of both internal and external risks.

Focuses on Continuous Improvement

Continuous improvement challenges organizations to constantly evaluate the effectiveness of its processes and provide value to its customers. A successful ERM framework will promote continuous improvement by regularly reviewing key risks and key risk mitigation actions/strategies.

Why is ERM Important Now?

Uncertain economic future

The uncertainty of the overall condition of the US and global economies increasingly emphasizes the need for risk management, and the achievement of strategic goals.

Risk management is a top priority for Boards

Poor risk management practices have been blamed for the credit crisis and ensuing global financial meltdown. Institutions and regulators suggest that risk previously was simply reported, rather than managed.

Continuously improve risk management by focusing on business performance

Develop quantification process to measure risk impact to value

Coordinate enterprise-wide response to the most significant risks

Sustain risk management and use it to create business value

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